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How to get a loan
Basic guide to borrowing cash.
Why get a loan?
Many of us will need to borrow money at some stage in our lives, whether it is a mortgage for a house or a loan for a shiny new car. Big purchases such as this usually cost a good few euros, so most people will need to take out loans for them. Taking out loans is a pretty common thing, but as with most things in life, it is best to be informed before doing so.
A loan is basically a sum of money you borrow from a bank or credit union. You pay back this money within an agreed period of time, but you also pay interest on the loan. Interest is basically like a charge for the privilege of borrowing. Different banks/credit unions/types of loans have different interest rates.
What you need to know before you borrow:
- The most important rule of all is to only borrow what you can afford to pay back. If you only earn €500 a month from your part time job; a loan with payments of €200 per month would probably not be a good idea. Make sure you are not going to leave yourself without food or electricity because you decided that a snazzy new bike would be cool.
- Check to see if you can save up to buy the item, instead of borrowing money.
- Shop around for value. As with any purchase, there are always differences in prices and interest rates with different institutions. One of the most common forms of borrowing is credit cards, but credit cards are actually one of the most expensive forms of borrowing! A loan from a credit union/bank is often cheaper than putting a large purchase on a credit card.
- Check out your credit history. Your credit history is a record of your borrowing practices and it details whether you were/are good at paying back, whether you pay back on time etc. All financial institutions check out your credit history before making a loan.
- Get some more info before you borrow. Itsyourmoney.ie has lots of info on loans on their website.
How to get a loan:
- It is usually easiest to get a loan from a place you have a history with, such as your local credit union or your current bank.
- Fill in a loan form and don’t leave anything out. Don’t fiddle with the truth as this may cost you the loan and tarnish your credit record.
- You will usually need to give proof of employment or college course, details of your income and proof of address.
- Many loans can now be applied for online, as well as at your local branch.
- If you have a bad credit rating, your interest rates may be higher.
Further Information:
www.consumerconnect.ie/eng/
www.mabs.ie/
